Budget in full gear, but still weighed down by economy

Walworth County's 2014 budget process is underway. On Sept. 5, I released the first draft of next year's spending plan called the county administrator's budget. After its release, supervisors spent the next two weeks proposing modifications to the plan, and on Sept. 19, the board's finance committee approved its own version of the budget, called the preliminary budget. This second draft is subject to further amendment in November; however, as things stand right now, the overall tax levy needed to support the 2014 budget would decrease by about $80,000 from last year's levy.

One factor that continues to influence county budgeting is the economy, which has yet to fully recover from the last recession. Since the 2008 banking meltdown and the recession that followed, I have tracked a number of statistics that have important impacts on county government and its taxpayers; these include equalized value, sales tax revenue and real estate activity. I never imagined in fall 2008, when I began reporting these numbers in my annual budget letter, that they would continue to be a burden five years later.

The lackluster economy has a three-fold impact on our budget. First, taxpayers continue to be stressed. Since 2009, $2.5 billion in equalized value has disappeared from the county tax rolls. Equalized value represents the fair market value of all taxable property in the county. This year's 4 percent decline is the fourth consecutive annual decrease, and our county's 16 percent decrease over the four-year period is the third largest in the state. The majority of the local tax burden falls on homeowners, and they are under pressure. Our budget needs to reflect this fact.

A second impact of the poor economy relates directly to our bottom line. We depend on revenues, generated by economic activity, to provide important services. Walworth County government, for example, receives one-half cent on purchases subject to the state sales tax. Our share of that tax, which stood at $8 million in 2008, dropped to $7 million in 2009 and has remained essentially flat since then. Real estate recording fees and zoning permits, which reflect real estate activity, show similar decreases.

A third impact of the economy relates to an increased demand for county services. Persistent unemployment and underemployment increase caseloads at our health and human services department, for example. Federal health care reform, scheduled to begin next month, likely will exacerbate already large workloads in that office.

Each year I highlight themes that have helped shape the budget. This year's themes are centered on maintaining fiscal strength. Detroit recently joined a growing list of bankrupt local governments. Rising retiree and benefit costs, high debt loads and deteriorating infrastructure are hallmarks of these financial failures. Our 2014 spending plan builds on the efforts of previous budgets to proactively address these threats.

• Controlling costs: Underfunded pension obligations and rising employee health insurance costs have limited the ability of an increasing number of municipalities to provide vital public services. While it is important for any organization to be able to offer benefits to recruit and retain talented employees, the ability of taxpayers to fund those benefits is not unlimited. Beginning in 2005, the county made important changes to its retiree health insurance benefit and began funding a “locked box” to pay for these future benefits. Through disciplined budgeting by the board, funding of the locked box is actually ahead of schedule to the point where no “deposit” needs to be made in 2014. In addition to managing its retiree obligation, the board recently approved changes to its self-funded employee health plan that are projected to save nearly $1 million in 2014.

• Reducing debt: The county's 2014 budget continues to aggressively pay off debt. Outstanding county debt exceeded $50 million in 2008. By 2014, that figure will be less than half of that amount. Less debt means lower taxes as fewer levy dollars are devoted to paying principal and interest. Debt service payments will be more than $2 million lower next year as compared to 2013.

• Protecting infrastructure: The county has made a significant investment in its infrastructure in recent years. In addition to major road projects, the county has replaced or remodeled most of its buildings during the past decade. As a result of all of this work, our facilities are in good shape. We could take advantage of our new buildings by simply waiting until they become obsolete and in disrepair. This has been the model followed by many of the municipalities that now find themselves in financial distress. Our 2014 budget represented a milestone by moving our road reconstruction program away from borrowed money and back onto the tax levy. Our 2014 budget expands this concept to our facilities by contributing to a building fund based on the depreciation of these assets. As a result of both our building and road funds, our five-year capital plan projects no new borrowing during the 2014 to 2018 time frame.

If you are interested in learning how your tax dollars will be spent next year, I encourage you to get involved. Key budget documents are updated throughout September and October and can be found on the county's website, www.co.walworth.wi.us. You are invited to share your thoughts at our Oct. 29 public hearing on the budget. The hearing will begin at 6 p.m. at the Walworth County Government Center in downtown Elkhorn.

Dave Bretl is the Walworth County administrator. Contact him at (262) 741-4357 or visit www.co.walworth.wi.us.